Why London - 12 Oct 12

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Why London? Foreword
Foreword
London is one of the best cities in the world. It is a magnet for
talent, a centre for innovation, and a leading city across a wide-
range of sectors.
London has always thrived on its openness to the world, and
ensuring that London continues to attract businesses, visitors and
students is a key factor in its future success.
The success of world cities like London has inspired others to
seek growing international participation. A better connected
world has also enabled less global cities to become more
accessible.
In light of these future trends, London will only continue to
attract sizeable overseas investment if it can offer significant
returns compared to its main city competitors.
This report commissioned by London & Partners looks at
the drivers of business location decisions and how London fares
among its peers. This research initiative will help guide us and
businesses in making better investment decisions.

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Why London? Contents
Contents
Introduction …………………………………………………………………...3
Executive Summary ………………………………………..………........5
Travel Trade …………………………………………………………..........10
Business Tourism …………………………………………………………..27
FDI …………………………………………………………………..….…………43
Creative Industries ………………………………….…….....45
Life Science ……………………………………………….……..…50
Financial Services ………………………………………..….….58
Business services ………………………………………….…...63
Technology ……………………………………………………...…69
Insights and recommendations …………………….…....74
Appendix ………………………………………………………………….…...76

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Why London? Introduction
Introduction
London & Partners have commissioned Volterra to carry out an analysis of
what drives returns in travel trade, business tourism, and foreign direct
investment (FDI) in five industries, as well as how London compares against
a selection of comparator cities. The research touches on the important
issues that London needs to address in order to further enhance its
position as a location for tourism, business events and FDI.
London faces a number of key challenges in the years ahead and London’s
global position will be determined by its ability to adapt to these challenges
and re-invent itself. These challenges include:
 Low growth and continued stagnation in London’s largest markets in
Europe will affect growth rates in the travel trade and business
events markets as well as direct investment from these markets.
London needs to maintain its attractiveness as a destination in its
mature markets but also adapt its offering to be more attractive to
customers and investors from emerging markets
 London faces greater competition from global cities such as
Singapore as the world centre of gravity shifts gradually eastward.
The purpose of this report is to understand the factors that influence city
location decisions, and to identify the drivers of returns that can be

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Why London? Introduction
achieved in a city, together with their relative importance determining overall return.
For the travel trade and business tourism sections of this report, two separate surveys were carried out of experts in the travel trade
and the business events industries. The surveys asked respondents to rate London and five comparator cities on factors identified as
drivers of return for these industries. Using the responses received, an ROI barometer was created for each area which weighted the
strength of each city by the importance of each factor.
The FDI section of this report combined interviews with industry leaders in five industries (financial services, business services, life
sciences, creative industries and technology) with bespoke data analysis. Historic Return on Investment (ROI) figures were then
compared to a future 2020 scenario for London and a selection of comparator cities.
We would like to thank our global industry panel for advising us on the FDI research. They include:
Mr. Johan Gott - Director of the A.T. Kearney Global Business Policy Council
Mr. Ranjan Chakravarti – Senior Vice President Global Strategy, Ranbaxy Laboratories
Mr. Robert Schukai - Global Head of Mobile Technology, Thomson Reuters
Mr. Michael Del Nin - Senior Vice President of Corporate Strategy, Time Warner
We would also like to thank the other companies that contributed to the FDI research, including: Shionogi Pharmaceuticals, Yammer,
Banco do Brasil, Beacon UK, and Salesforce.com.
Finally, a big thanks to the members of our academic panel, who reviewed and commented on the methodology and findings of this
report. These included:
Sir Peter Hall - Professor of Planning and Regeneration, University College London
Mr Carl Weisbrod – Clinical Professor and Academic Chair of Global Development, New York University Schack Institute of Real Estate
Professor Mike Batty CBE – Founder of Centre for Advanced Spatial Analysis, University College London
Mrs Diane Coyle, OBE – Member of the UK Competition Commission and Vice Chairman of the BBC Trust.

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Why London? Executive Summary
Executive Summary
Our research confirmed the popularity of London for travel trade, business
tourism and FDI, with London’s main strengths including:
• Its diversity and dynamism – it is a centre where people can exchange
ideas and develop creative new possibilities
• Rich entertainment and retail offering – creating a place where people
want to visit and live
• It is well recognised for the quality of its human capital – covering the
broader service offering available in the city
• Its geographical location puts it at the centre of the world and allows it to
attract and serve the globe like no other city
• Its openness and cultural diversity appeals to people from all over the
world.
London is expected to become even more attractive for business over the next
decade, however, a number of weaknesses may deter some of the interest in
the city including:
• Immigration restrictions and bureaucracy is an issue, as well as income tax,
both are a threat to maintaining London on top as an attractive place to live,
and are deterring people from visiting the city
• Increasing uncertainty about potential changes to the tax regime and about
the likely changes to the financial regulatory environment are deterring expats
and FS businesses
 Congested Heathrow and the lack of progress in increasing London’s airports
capacity are deterring visitors and investors.

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Travel Trade
 Over 70% of trade travel industry experts ranked London as one of the top 3 most popular city breaks in terms of volume of sales
 The ROI barometer ranked Paris as the city with potentially the highest return. However on this measure Paris is followed
closely by London and New York, and then further behind are Istanbul, Singapore and Rio de Janeiro. The bottom 3 cities are
viewed in a league below the top 3
 The practicalities of Accommodation and Transport were rated as the most important factors rather than any ‘City Specific’
factors in attracting tourists to cities
 London’s accessibility is viewed as a big strength. On the measure of direct flight connections it ranks as the best city in Europe.
However the city can also be seen as expensive to travel around and some concerns were raised over whether its airports will
have the capacity to remain accessible in the future. Ensuring it remains accessible in the future will be important to retaining
its position as a leading city to visit
 London ranks as the best city for Heritage and Retail and jointly with New York on Entertainment
 London is considered a very welcoming, open, and culturally diverse city, factors that will help it to continue to attract tourists
from all around the globe
 The variety of offers available in London for different types of people, different budgets and first time / repeat visitors is very
appealing
 Asian respondents rank London as the best city to visit, which is positive as the world economy shifts in that direction and we
expect a larger proportion of tourists to be from those emerging markets in the future.
Business Events
 The ROI barometer ranked London the highest followed by Paris, Barcelona, Singapore, Chicago and Vienna
 London, Paris and Barcelona were consistently rated in the top three destinations except for North America where respondents
rated Singapore above Barcelona. Asian respondents rated London as a much stronger location than in other regions. All regions
rated London as the number one location for return on holding business events
 As with travel trade, the popularity of London with Asian respondents is a positive finding for future competitiveness of the city
as the world economy will continue to shift towards emerging markets and we would therefore expect a larger number of
business events to be coming from those parts of the world in the future
 The practicalities of Travel Accessibility and the Quality & Availability of Facilities are rated as the most important factors

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Why London? Executive SummaryWhy London?
 London is ranked as the best city on all factors except Quality & Availability of Facilities, where it rates 2nd to Singapore
 Paris is ranked as the 2nd best city on nearly all measures
 The lack of language barrier is a benefit for many attendees as well as investors
 The main challenges facing London are seen as the lack of large accommodation packages for large events and the length of time
to get a visa was given as a specific deterrent for visitors from India
 Both business and leisure respondents stated that the ability to combine business and pleasure was a key attraction of the city
 As with travel trade, the city is considered open, welcoming and culturally diverse. The leisure activities that the city has to offer
are also seen as a bonus for business event attendees
 London was identified as a leading global city, with access to experts across many fields including scientists, academics, finance,
technology and creative industries. This was cited as a huge positive for holding events in the city. However some respondents
suggested the industry could make more of this by better engaging with these experts. This would also be relevant to attracting
FDI to the city.
FDI
Competitor Cities
 Future threats to London’s position are perceived to be coming primarily from Singapore, given that growth is expected to come
from Asia and the city offers strong government support and very good infrastructure
 China, and Shanghai as the closest competitor to London within China, has significant barriers to entry in place for many
industries. Many investments there are currently not ROI driven but seek to build gradual presence and enhance the company’s
global brand
 New York shares many similarities with London but tends to focus more on its vast local (American) market and is therefore less
internationally focused than London. Its city leadership is perceived as very focused on its economic development and on
fostering an enabling entrepreneurial environment
 European cities represent less credible threat to London than New York or Singapore. The ease of using English as the business
language, large pool of talent, and more onerous employment laws in many potential European locations than in London, make
London a preferable location for European Headquarters.

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Creative Industries
 A key factor that drives return on investment in creative industries is access to talent and companies will often locate in higher
cost locations where the key creative personnel are based. Other important factors identified include: market size and growth
potential, ownership rules and intellectual property protection
 Cities were benchmarked on their return on investment based on scores derived from a range of key indicators. London was
found to have the highest return followed by New York, Berlin, Singapore and Shanghai. Based on a future scenario for the
industry, Shanghai is predicted to overtake Singapore while the ranking of the other cities would remain the same in 2020
Life Sciences
 The analysis focussed on R&D investment in the life sciences. Given the revenue stream of R&D investment, an alternative
measure of return was used which looks at return on objectives. Some key factors identified as driving return on objectives in
the life sciences were: quality and availability of human capital, intellectual property protection, the potential for R&D
collaboration with research institutions and the existence of industry clusters, as well as the size of the market and the potential
for market growth
 Cities were benchmarked on their return on objectives based on scores derived from a range of key indicators. Our
benchmarking analysis put New York as the location with the most favourable factors followed by London, Munich, Singapore
and Shanghai. Based on a future scenario for R&D investment in the industry, the attractiveness of Shanghai as an investment
location is predicted to increase significantly as the R&D environment improves and intellectual property protection laws are
further enhanced.
Financial Services
 A number of key investment location decision factors for the financial services industry were identified including: the size of the
market, the existence of a financial services industry cluster, the regulatory environment, tax, the availability of qualified staff
and the office rent and wage costs in a city. These factors were tested using econometric analysis to determine the drivers of ROI
in the industry

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 Market size, wage costs, office rental costs and tax were found to be good predictors of ROI in the financial services industry.
Based on 2010 return on investment values, Singapore was found to have the highest return on investment followed by
Frankfurt, London, Shanghai and New York. A future scenario for the industry in 2020 predicted that returns across many cities
would decline with London overtaking Singapore as number one ranking as it benefits from connections to both Asia and the US
while costs rise more modestly during the period.
Business Services
 A number of key investment location decision factors for the business services industry were identified including: the size of the
market, access to a wide talent pool, office rent and wage cost, tax, as well as a friendly and a stable business environment.
These factors were tested using econometric analysis to determine the drivers of ROI in the industry
 The analysis found that the size of a city’s equity market, economic growth, level of corporate taxation and interest rates were
together good predictors of ROI in the business services industry. Based on average actual returns from 2006 to 2010, Singapore
was found to have the highest returns followed by New York, London, Shanghai and Munich. A gradual return to growth in the
UK and US should see returns in London heading the group in 2020, followed closely by New York and Singapore.
Technology
 Technology is becoming an increasingly important industry for global cities and often coincides with emerging centres for
creative industries. Some key location decision factors identified for technology companies investing in cities include: the size of
the addressable market, quality and accessibility of ICT infrastructure, access to top talent, ease of doing business, as well as the
size of the local technology cluster
 Average actual ROI values from 2003 to 2010 place New York highest in terms of ROI followed closely by London and Berlin,
while Singapore and Shanghai in fourth and fifth place had significantly lower returns. Using our ROI model for the technology
industry indicates returns are expected to increase in all cities in 2020, with London overtaking New York slightly while the
difference in cities’ performance remain largely unchanged.

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Why London? Travel Trade
Travel Trade
Introduction
The aim of this research was to compare and contrast London with other relevant city destinations for
travel trade and to arrive at a potential measure of ROI for the industry. In doing this analysis we
surveyed a range of people across the travel trade industry, from tour operators and travel agents to
coach operators and airlines. We asked these respondents what they view as the key
attributes in attracting visitors to cities and how strong they think different cities are in each
of these factors. We utilised these responses to arrive at a measure of the potential ROI for
the industry. Considering what the future might hold for types of tourist and the world
economy we arrived at recommendations for how popularity across different cities might
change in the future and how London will be best placed to position itself to continue to be
one of the most successful city destinations.
Diversity of City Experiences
City destinations are crucial for the development of a strong travel and tourism portfolio
because of the dynamic experience that they offer. Cities offer a wide range of types of trip.
From short, day or weekend, breaks, to long trips; from first time one-off visitors to those
who return regularly; and those coming from nearby and further afield. The types of things
that tourists do on these vacations also vary hugely, from shopping, sight-seeing and
entertainment (sports, theatre) to one-off events like the Olympics.
Comparator Cities
Through literature review and discussions we have chosen to compare London with Istanbul,
New York, Paris, Rio de Janeiro and Singapore. New York and Paris were chosen as they have
been popular city destinations for a long time and are still viewed as the main competitors to
London; Singapore is seen as a fast growing city in terms of popularity; and Istanbul and Rio
de Janeiro are viewed as potential growth cities for the future.
London’s
iconic
architecture
and rich
history
attracts
visitors from
around the
globe

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Popularity of Cities
There are many different measures of the popularity of cities. The table on the right
reports statistics from Euromonitor International on the number of international
visitors. These show that London has been performing consistently well in attracting
international visitors. In 2006 London occupied the top position with over 15.5 million
arrivals. By 2010 however, London had fallen to third position, registering
approximately 14.7 million arrivals and having been overtaken by Hong Kong and
Singapore which attracted 20 million and 18.3 million international visitors
respectively. This same trend can be seen for Paris but more markedly, with the city
falling from 3rd
most visited city to 9th
over the same period. Istanbul and Singapore
have both seen an almost doubling of arrivals between 2006 and 2010 with both cities
moving several places up the rankings. Singapore has surpassed London on this
measure and Istanbul is now very closely behind Paris. The statistics for New York and
Rio de Janeiro are more difficult to interpret, with both showing growth in visitors from
2006 to 2008 but falls from 2008 to 2010.
Top Ten City Destinations Top Ten City Destinations
2010 2006
Rank City
Arrivals
City
Arrivals
‘000 ‘000
1 Hong Kong 19,973 London 15,640
2 Singapore 18,297 Bangkok 10,350
3 London 14,706 Paris 9,700
4 Macau 13,098 Singapore 9,502
5 Bangkok 10,984 Hong Kong 8,139
6 Antalya 10,641 New York 6,219
7 Kuala Lumpur 10,351 Dubai 6,120
8 New York 8,961 Rome 6,033
9 Paris 8,176 Seoul 4,920
10 Istanbul 8,124 Barcelona 4,695
11 Dubai 7,752 Dublin 4,469
12 Mecca 6,122 Bahrain 4,418
13 Miami 6,003 Shanghai 4,315
14 Rome 5,620 Toronto 4,160
15 Shanghai 5,397 Kuala Lumpur 4,125
2006 4 1 6 3 16 35
2008 4 1 2 6 10 40
2010 2 3 8 9 10 63
Rank of City
Source: Euromonitor International

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Why London? Travel TradeWhy London?
We asked our survey respondents to indicate their view
of the top 3 most popular city breaks (in terms of volume
of sales). London was the most popular city ranked
within the respondents’ top 3 cities – of 97 respondents,
46 ranked it as the best city, 18 as the 2nd
best city and 12
as the 3rd
best city, meaning that 79% of respondents
ranked it within their top 3 cities by volume of sales.
The chart shows the responses to this question for our six
chosen cities. London was clearly rated the most popular
city by our respondents and Paris and New York followed,
rated within the top 3 destinations by 46% and 19% of
respondents respectively. Singapore and Istanbul were
occasionally mentioned, each being ranked within the
top 3 destinations by 4% of respondents. Rio de Janeiro
was not ranked within the top 3 destinations by any
respondents.
When we consider the responses to this question made only by those
respondents who market each city destination, the proportion who rank each
city in the top 3 rises for most cities. On this measure 14% of respondents
who market Singapore view it as a top 3 destination and 10% of those who sell
Istanbul.
City % of times in
top 3
% of times in top 3 by
respondents who sell
the city
London 79% 72%
Paris 46% 57%
New York 19% 37%
Singapore 4% 14%
Istanbul 4% 10%
Rio de Janeiro 0% 0%
0 10 20 30 40 50 60 70 80
Rio de Janeiro
Istanbul
Singapore
New York
Paris
London
Number of times ranked Top City 2nd City 3rd City
Source: Volterra
Source: Volterra

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Spotlight on London
London is renowned as one of the best and most diverse cities to visit. Our survey research supported this with comments on the city
reflecting the diversity both in terms of types of things on offer as well as the attraction to a wide range of tourists.
Despite the growth in visitors to Singapore and Hong
Kong, London remains the only European capital city in
the top five city destinations worldwide, recording
almost double the number of international visitors
than Paris and Istanbul in 2010. In Europe, London has
showed consistent demand for tourism compared to its
city competitors. Even during the economic slowdown
and recovery years, London performed steadily.
European Cities Marketing showed that, in 2009 and
2010, the number of bednights generated by
international tourists in London was approximately 35
million. Comparatively, Paris registered approximately
23 million bednights in 20101
.
1
‘European City Tourism is on the Up Again’ (2011), European Cities Marketing
“Variety – something for everyone”
“A very good range of accommodation to suit all budgets”
“London has so much to offer the first time tourist or the repeat visitor”
Top 10 European Cities Total Number of Bednights by International Tourists

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London had the highest occupancy rate of all European cities in 2010 (see chart on the
right) and forecasts by PwC suggest that the hotels in London will remain the busiest in
Europe as the occupancy rate continues to rise, to the highest rate since the 1970s .
Compared to a 73% occupancy average for the cities reviewed in the study, London is
estimated to see an occupancy rate of approximately 85%. During its peak months, London
will operate very close to its full capacity. The forecasts developed by PwC also show that
London is the fourth most expensive city, when considering ADR (Average Daily Rate) in
tourist accommodation, after Geneva, Paris and Zurich. High occupancy and high ADR
levels show that demand for tourism in London is resilient to higher prices when compared
to other European cities. This is also true for Paris, which has a high occupancy (77%) and is
forecast to have
the second
highest ADR in
2012 (higher than
London).
London also maintains a diversity of source markets
interested in visiting the city. Whereas most of its tourist
demand is still largely based in Europe, London benefits from
considerable international interest. In 2010, it registered over
1.7 million arrivals from the US, with considerable interest
also from Australia and Canada. This shows that the travel
and tourism sector in London benefits from a stable demand
from the European market as well as international demand, in
particular from North America.
This popularity with visitors from across the globe was
supported by our survey respondents who identified both
Average Daily Room Rate and Occupancy Rate 2010
London Arrivals by Main Source Markets
Source: Roland Berger 2012
Source: Volterra analysis of TourMIS (2010)

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specific characteristics of the city and also its welcoming atmosphere and culture as the reason for its success in attracting a wide range
of people from different places.
Measuring City Success
In a recent study of European capital city tourism, Roland Berger identified
a number of recognised indicators that allow the industry to compare city
performances2
. These are shown in the box to the right. On these
measures London scores highest on accessibility (as the chart on direct
flight connections on the next page shows) and very high in internationality
(the share of European and non-European tourists) but has seen relatively
low growth in overnight stays and bed capacity.
Academic research into destination attractiveness showed that tourist
attractiveness is a very heterogeneous concept, as it can easily encompass
a large number of variables which differ significantly from one another. For
example it ranges from natural tourist resources, to cultural and historical
heritage, to climate, services and facilities as well as tourist infrastructure.
In this context, an Index of Destination Attractiveness was
2
‘European Capital City Tourism’ (2012), Roland Berger
Key Tourism Performance Indicators for City
Destinations
• Growth in Overnight Stays
• Number of Overnight Stays/Inhabitants
• Growth in Bed Capacity
• Value Creation
• Internationality
• Accessibility
• Congresses
Source: Roland Berger (2012)
“For most US tourists, the fact that most people speak English fluently and
[have] a traditionally favourable opinion of Americans helps.”
“[London is] compatible to the Indian taste”
“London has so much to offer the first time tourist or the repeat visitor”

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Number of direct flight connections [schedule for summer 2011]
put forward as a composite indicator, on which to then base an assessment of the overall destination attractiveness and weight of each
factor. The factors and variables that could describe them are summarised in the table below:
Source: Index of Destination Attractiveness as a Tool For Destination
Attractiveness Assessment (2011), Tourism, 59(4).
FACTORS VARIABLES
Accommodation and
catering facilities
Quality and variety of restaurants, quality of
accommodation, friendliness
Activities in destination Sports and recreational opportunities,
entertainment opportunities, shopping
opportunities
Natural features Accessibility, climate, scenic beauty
Destination aesthetics Urban and architectural harmony of the place,
presentation of cultural heritage, quality of
information in destination
Environmental
preservation
Tidiness of the place, environment
Destination marketing Image of the country, feeling of personal safety,
quality of country’s promotion
Source: Roland Berger (2012)

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Potential ROI Barometer
Bearing in mind the factors that had been identified by the research as important in determining city attractiveness and success, we
designed our survey to ask the relative importance placed on these factors by the travel trade industry in determining how easy they
find it to market a destination. We then asked them to rate the relative strengths of each of our chosen cities on each factor.
The average results for the importance of these nine
factors are shown in the chart on the next page. This
shows that the practicalities of Accommodation and
Transport were rated as the most important factors,
rather than any ‘City Specific’ factors. This is consistent
with the literature review that concluded on the
importance of accessibility and availability and price of
beds.
After the practicalities, the travel trade industry rated
the ‘Educational’ factors more highly than the factors
that could be viewed as more ‘Recreational’. They rated
Culture, City brand and Heritage more highly than
Entertainment, Retail and Restaurants. The least
important factor rated by the travel trade industry was
ability to attract large volumes of visitors.
Generally the factors are placed quite close together in
terms of importance, most likely reflecting the diversity
of types of city breaks offered, marketed and sold
across the travel trade industry.
We asked the travel trade industry experts:
“Please indicate the relative importance of the following factors in selling a city
break (from 1 to 10, where 1 equals not important and 10 equals very important)”
• City brand recognition
• Variety and quality of retail offering
• Entertainment offering (e.g. nightlife, theatre, major sport and music events)
• Quality and range of restaurant offering
• Transport connections
• Ability to attract large volume of visitors
• Cultural offering (e.g. museums, galleries)
• Heritage offering (e.g. landmarks)
• Variety and quality of accommodation
• Other (please specify)
Question from Volterra survey of travel trade industry (2012)

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After ranking the relative importance of these ten factors we then asked the respondents to rate the strength of each of the comparator
cities that they sell on each of those factors. The results of this question about strength across cities are presented on the next page,
showing that London ranked highest on Heritage and Retail and joint highest with New York on Entertainment. Paris ranked as the
strongest city on all other factors and it ranked significantly above other cities on the Quality and Range of Restaurants factor.
Paris, London and New York were scored by our respondents in a noticeably different league to Singapore, Istanbul and Rio de Janeiro.
The exception to this was for Variety and Quality of Accommodation where Singapore scored particularly well. Istanbul scored well on
Culture and Heritage but fell down on the more ‘Recreational’ factors, where it scored lowest in terms of Entertainment, Retail and
Restaurants.
Source: Volterra

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Source: Volterra

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Using our survey responses we created a potential
ROI Barometer by weighting the strength of each city
by the importance of each factor and collating it into
a single score for each city. The results are shown in
the chart below. Paris is ranked as the top city on
this measure, London is only 1.7 points below Paris
and only 0.3 points separate London and New York.
So the top three cities are very close together.
There is then a very noticeable drop to the next tier
of cities with Istanbul and Singapore 9 points further
below and Rio de Janeiro a further 5 points below.
Different regions different views
The travel trade survey was responded to by 111 travel trade experts, of which around a third were tour operators, a further third were
travel agents, 9% were group organisers, 6% were wholesalers and 15% were made up of coach operators, airlines, trade associations,
train operators, travel consultants, tourist offices, and attractions.
We segregated the results by organisation type and found no significant differences between the scores or rankings of the cities. The
only factor that resulted in slightly different results was when scores were split depending on where the head office of the respondent
was based. These results should be viewed as illustrative only as some of the scores are based on fewer than 10 responses.
Source: Volterra

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Over half of respondents’ headquarters were in Europe, a
further 18% in North America and 12% each in Asia and South
America. The remaining 4% were in Australia, New Zealand,
South Africa and Turkey (see chart above). The chart on the
right shows the ROI barometer when split out by scores given
by respondents headquartered in these different places.
European respondents rank very closely to the average but
they rank Singapore above Istanbul by 2 points.
North American respondents rank New York slightly higher
than Paris and London and rank the other three cities lower
than the average scores. Asian respondents ranked London as
the best city, 1 point above Paris which is 2 points above
Asia
12%
Europe (incl. UK)
54%
North America
18%
South
America
12%
Other
4%
Location of Respondent’s HeadquartersRespondent’s Organisation Type
Source: Volterra
Source: Volterra
Source: Volterra

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Singapore in 3rd
place and New York and Rio de Janeiro are 3 points further below in joint 4th
place. Istanbul is the lowest ranked city by
Asian respondents. South American respondents generally gave higher scores than all other respondents but they ranked the cities in
the same order as the average, but with Paris 3 points above London and New York, and Istanbul much more highly ranked than either
Singapore or Rio de Janeiro.
London’s strengths and weaknesses
THE STRENGTHS
Multiple strengths were identified for London. Typically several respondents mentioned every strength listed below and the quotes are
simply representative of the positive responses we received.
• London’s accessibility is a big strength. On the measure of direct flight connections it ranks as the best city in Europe, followed
closely by Paris and our respondents rated its transport connections as strong, only marginally behind Paris.
• London benefits from a huge and diverse selection of destination aesthetics, with an amazing history, cultural heritage and urban
and architectural harmony.
“Ease of access by Eurostar” “Flight connections are another big draw”
“The American fascination with Royalty is also a draw for Americans choosing
London!”
“Victorian architecture and world famous West End entertainment as well as
the city’s music, writing and film heritage”
“Icons like London Buses, Telephone Boxes, London Taxis”

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• London is also renowned for its openness and cultural diversity, making it appeal to people from all over the world. The lack of
language barriers to most of the world is also a huge strength of the city.
• The ability to combine business and pleasure is also seen as a huge benefit for the city.
THE WEAKNESSES
In general very few weaknesses were identified for London and the comments were overwhelmingly positive. In this section we
summarise all weaknesses that we have found any evidence for although most were only raised by one or two respondents.
• Accommodation and transport can be seen as expensive. Budget accommodation can be seen as poor quality.
“London accepts all races, creeds and colours.”
“[For the Asian market] there is no language issue, no vegetarian food issue.”
“Can also visit people from the educational field like Professors, Universities and
Research Scholars.”
“The hotel prices have been increasing quite a lot over the last seasons.”
“Ease of access to transportation, although expensive”
“The poor quality of the 2* and 3* hotels in London, compared to other destinations.”

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• The city is not seen as the most positive for making deals and promotions with the travel trade industry.
• Visas can be difficult and time consuming to get.
• The city can be difficult for coaches.
“We notice a strong tendency of trying to sell the rooms directly instead of offering
capacity to overseas tour operators, who make publicity for the destination.”
“Maybe offer more promotions to grow tourism”
“It could have been even more popular had not it been for a very long time we need
to issue a visa” (comment from Russian respondent)
“London (as with Paris) is a very difficult city to navigate and is not the most Coach
Friendly city in the UK” (comment from coach operator)

Page | 25
Future trends
London has been a very popular city for many years and continues to attract
large numbers of tourists. Over the last four years Singapore and Hong Kong
have doubled their numbers of visitors and overtaken London as the most
visited cities. As the world economic stage continues to change and more
demand starts to come from emerging economies we expect that London will
continue to see competition from these cities. However London benefits from
some intrinsic attractions that will not change in the future – the culture and
heritage of the city are some of its most attractive features and will continue to
be so. London is very popular among Asian visitors, which is positive as the
world economy shifts in that direction and we expect a larger proportion of
tourists to be from those emerging markets in the future. London is renowned
for being open, welcoming and culturally diverse, factors that will help it to continue to attract tourists from all around the globe.
The competitive growth of the Asian-Pacific tourist
market is evident. London may see increasing
competition in terms of room rates and promotions
and the time taken for some tourists to acquire the
right visas is also an issue. Whilst accessibility is one of
the city’s key strengths, it can also be seen as
expensive to travel around. In addition to this if
Heathrow continues to be constrained the number of
flights to the growing tourist markets may not keep
pace with demand and may result in higher prices and
less reliable journeys. Both of these factors could
constrain future growth of the travel trade industry.

Page | 6
Insights and recommendations
Whilst London is seen as the ‘father of all cities’, fathers grow old and children become the new leaders of the family. London is the
leading city on many rankings, but there is also evidence that other cities are growing and expanding into the travel trade market. In
order to remain a competitive and top ranking city destination London needs to:
• Remain competitive in terms of quality and availability of accommodation to suit all budgets and travellers
• Continue to be one of the most accessible locations to travellers from all across the globe, but especially growth economies. This
may require further investment in transport infrastructure that is already at full capacity (e.g. Heathrow for international travel
and continued reinvestment in the underground network for local travel)
• Continue to invest in its public realm to ensure that it remains a city seen as safe and
easy to visit, as well as being seen to take good care of its cultural assets
• Continue to invest in its entertainment and restaurant offers and support its retail
locations
• Consider offering more promotions to attract visitors
“London is a father of all cities.”
• In so far as it can have any influence upon visas, ensure that the city remains easy for
tourists from all across the world to visit
• Asian respondents rank London as the best city to visit, which is a positive finding that the
city should continue to nurture as the world economy shifts in that direction and we
expect a larger proportion of tourists to be from those emerging markets in the future.

Page | 27
Why London? Business Tourism
Business Tourism
Introduction
The aim of this research was to compare and contrast London with
other relevant city destinations for business tourism and to arrive at a
potential measure of ROI for the business events industry. In doing this
analysis we surveyed a range of people across the business tourism
industry, from associations and conference companies to incentive
event organisers and intermediaries as well as companies’ in house
event organisation teams. We asked these respondents the relative
importance of different factors in the success of their events in cities and how strongly they think different cities are in each of these
factors. We utilised these responses to arrive at a measure of the potential ROI for the
industry. Considering where the growth in demand will come from for business events in the
future we arrive at recommendations for how popularity of different cities might change in
the future and how London will be best placed to position itself to continue to be one of the
most successful cities for business events.
Importance of Business Tourism
Business travel and tourism is one of the major high yield sectors of the tourism industry. It
is estimated that a business visitor spends £131 per day on average in Britain. This is
approximately 72% more than the amount spent by leisure tourists in Britain on a daily
basis3
. It is standard to segment the market into Meetings, Incentives, Conferences and
Congresses, and Exhibitions (MICE). Meetings are held by corporate organisations and
include management meetings, product launches, training courses and annual general
meetings. Incentives are a tool used by companies to stimulate and reward staff. Research
has shown that travel is the most effective motivator. Conferences and congresses are
3
‘Britain for Events. (2010).
Value of Britain’s Events Sector
Conferences and Meetings
£18.8 billion
Exhibitions and Travel Shows
£9.3 billion
Incentive Travel
£1.2 billion
Corporate Hospitality
£1 billion
Cultural, Music and Sport Events
£5.8 billion
Source: Britain for Events (2010)
The ExCel –London’s
international Convention
centre – in located in the
heart of the Royal Docks

Page | 28
Why London? Business TourismWhy London?
meetings of individuals for the purposes of discussing something of common interest. Exhibitions are professionally organised events
that facilitate the meeting of buyers and sellers in a given market. Although it is relatively difficult to give a clear indication of the value
and volume of the total MICE market, the sector was estimated to bring £36 billion per annum to the British economy.
Popularity of London and the UK
Our city comparators for travel trade and business tourism were chosen
through literature review and discussions with experts. Within both areas,
we chose some existing competitors and some cities that are seen as
potential growth cities in the future. For business tourism we chose to
compare London with Barcelona, Chicago, Paris, Singapore and Vienna.
With the exception of Chicago, these cities are all in the top ten cities for
association meetings.
Worldwide rankings for the Association Meetings Market show that the UK
is among the top five destinations by the number of meetings held annually
per country. In 2011, London moved into the top ten cities hosting the
largest number of association meetings, occupying the 7th position. This is a
great leap for London, which was ranked the sixteenth top destination by
number of association meetings worldwide in 2009.
Measuring ROI in business tourism
Most studies that have tried to measure return on investment within
business tourism focus on the return to the individual attendees or the
return to the company holding the event. In this section we talk a little
about the factors that determine these returns. However it is important to
note that the aim of our study was to consider the return on investment to the event organisers, not to the attendees or companies.
Top Five Countries by Total
Number of Association Meetings
2011
Top Five Cities by Total Number of
Association Meetings
2011
Country # Meetings City # Meetings
U.S.A. 759 Vienna 181
Germany 577 Paris 174
Spain 463 Barcelona 150
UK 434 Berlin 147
France 428 Singapore 142
Italy 363 Madrid 130
Brazil 304 London 115
China 302 Amsterdam 114
Netherlands 291 Istanbul 113
Austria 267 Beijing 111
Source: The International Associations Meetings Market (2011), ICCA

Page | 29
For years, suppliers of meetings were quantifying
the value of events exclusively in budgetary
terms – i.e. delegates spend – nowadays the
focus has moved to the long-term benefits of
networking and knowledge transfers4
.
Businesses and investors have now shifted
towards more comprehensive measurements of
return on investment and return on objectives
(ROO) to widen their consideration from just
financial objectives to also include information
regarding increased employee satisfaction,
increased employee loyalty and increased
customer satisfaction (post programme). A
recent study of ROI and ROO of the motivational
events industry highlighted in the table on the
left showed that “providers and users of such
programs must clearly communicate to
management not only the expected return from
motivational expenditures but also how the
returns will be measured”5
. The Site Index survey considered the measurement of ROI and ROO in the motivational events industry. At
a time when every expense needs to be justified, they found that the measurement of ROI/ROO is gaining more focus. The survey
asked respondents about ways in which these return metrics could be measured. The survey found that hard measures such as
increased sales, profitability and growth of market share are still considered more important but that soft measures such as
commitment, loyalty and trust are seen as increasingly important although measurement of these factors remains difficult.
Because businesses pay increasing attention to composite ROI and ROO measurements, including post-programme quality indicators,
investors in the business tourism sector have to pay growing attention to these intrinsic organisational measurements in order to
4
C. Ipalawatte (2004) Business Visitors, Tourism Research Report.
5
The Annual Analysis and Forecast for the Motivational Events Industry: Focus on Measurement (2010), Site International Foundation.
Source: Site Index

Page | 28
evaluate the return on their investment. This is particularly relevant as research confirms that “if a business or event visitor leaves with
a positive impression, up to 40% of them will return at a later date with a holiday, often bringing family with them”6
.
A recent survey on destination selection for motivational marketing programmes showed that ‘the cultural and exotic appeal’ of the
destination is perceived as the defining feature for programme selection, both by planners/providers and users/consumers. However,
the recent recession has had a restricting effect on budgets, so meeting professionals expect higher ROI once a meeting is booked. It is
perceived that the focus will shift from standard measurements of adherence to budgets and attendee satisfaction to the ability to
negotiate ‘extras’ like free transportation as well as competitive offers such as formal dinners and entertainment. Overall, “it is
expected that the market will increasingly turn into a buyers’ market, where planners can negotiate more generous concessions,
incentives, rates and other contract provisions”7
.
Despite the movement towards considering measures outside of pure financial gains in order to consider the success of an event,
recent research found that budgetary value and overall quality of service are still the two most important factors in determining the
choice of destination for business events.
Potential ROI Barometer
Bearing in mind the range of factors that had been identified by the research as important in determining city attractiveness for
business events and their success, we designed our survey to ask the relative importance placed on these factors by the business events
industry in determining how easy they find it to attract events to a destination. We then asked them to rate the relative strengths of
each of our chosen cities on each factor.
6
Business Visits & Events Partnership.
7
Long Haul Tourism: The EU Market for MICE (2009) CBI.

Page | 31
The average results for the importance of these factors are
shown in the chart below. This shows that, as with the
travel trade industry, the practicalities of Travel
Accessibility and Quality and Availability of Facilities were
rated as the most important factors.
The least important were Ability to Attract High Calibre
Speakers or Ability to Attract Sponsors.
Also important are City Brand, Access to Local Knowledge
and Expertise, Variety & Quality of Retail, Cultural &
Entertainment Offering and Networking Opportunities.
These findings reinforce the findings of our literature review. Interestingly the difference in importance placed on various factors was
more significant in the business survey responses that the travel trade ones. Travel and Facilities were rated as 1.5 to 1.2 points
respectively (out of a total of 10 points) more important than the next most important factor (City Brand). City Brand in turn was rated
1.8 points higher than the least important factor (Attracting Sponsors) meaning the difference between most important (Travel) and
least important (Attracting Sponsors) factor was 3.3 in the business survey. In comparison the difference between most important and
least important factor in the travel trade survey was only 1.4 points. This reflects the extent of importance placed on facilities and
travel by the business tourism industry, which is reflected by the literature review that shows that despite increased interest in other
cost factors, accessibility and facilities are still the most important factors in determining where to have business events.
We asked business tourism experts:
“Please indicate the relative importance of the following factors in the success of
your event”
• City brand / city recognition
• Travel accessibility
• Access to local knowledge and expertise
• Ability to attract high-calibre speakers
• Networking opportunities
• Variety and quality of retail, cultural and entertainment offering
• Ability to attract sponsors
• Quality and availability of facilities
• Other (please specify)
Question from Volterra survey of business tourism industry (2012)

Page | 32
After ranking the relative importance of these eight factors we then asked the respondents to rate the strength of each of the
comparator cities that they market events in on each of those factors. The results of this question about strength across cities are
presented on the next page, showing that London was ranked as the best city on all factors except Quality and Availability of Facilities,
where it rated 2nd
to Singapore. Paris ranked as 2nd
best city on all factors except Quality and Availability of Facilities (Singapore 1st
,
London 2nd
) and Attracting Sponsors (where Chicago ranked marginally 2nd
, followed closely by Paris and Barcelona in joint 3rd
). Vienna
ranked as the lowest city on all factors except Access to Knowledge & Expertise (where Chicago ranked lower) and Retail, Cultural &
Entertainment Offering (where Chicago & Singapore ranked joint lowest).
Source: Volterra

Page | 33
Source: Volterra

Page | 34
Using our survey responses we created a potential ROI Barometer by weighting the strength of each city by the importance of each
factor and collating it into a single score for each city. The results are shown in the chart below. London is ranked as the top city on this
measure, followed closely by Paris 2 points below.
Barcelona and Singapore are very closely ranked in 3rd
and 4th
positions, a further 3-4 points below Paris. Chicago ranked marginally
higher than Vienna but both are a further 3 points below Barcelona and Singapore.
The cities were ranked in three noticeably distinct sets of 2 cities as highlighted in the chart on this page.
Source: Volterra

Page | 35
Different respondents different views
The survey was responded to by 164 business tourism experts, of which around a quarter were intermediaries, a further fifth were
incentives event organisers, 13% were in-house company organisers, 10% were associations, 8% were conference companies and 25%
were made up of other types of organisations including events departments, travel agencies, exhibition organisers, charities,
consultancies and tour operators (see chart below). We segmented the results by organisation type and found that Incentives Event
Organisers reliably ranked all cities more strongly on all factors but there was no actual difference in the rankings of the cities.
We asked our survey respondents the average number of
attendees to their events, as shown in the chart to the right.
Around 40% of our respondents typically organised events for
50-100 attendees and a similar number for 100-500 attendees.
The remaining 20% of respondents were split almost equally
between those who organised either smaller events (less than
50 attendees) or larger events (more than 500 attendees).
Some respondents who focussed on larger events commented
that the availability of hotels that accommodate large numbers
of visitors was poor in London, although this was not reflected
in the overall scoring of cities and there was no significant
difference between the scores given by respondents who
organised different sized events.
As with the travel trade survey, the only factor that resulted in significantly different results was when
responses were split depending on where the head office of the respondent was based. These results
should be viewed as illustrative only as some of the scores are based on fewer than 10 responses.
As shown in the chart on the left, over 40% of respondents’ headquarters were in the UK, and a further
20% elsewhere in Europe. Almost a quarter were in North America and 6% in Asia. The remaining 7%
were in Australia, Argentina, Russia, Israel and South Africa. The chart below shows the ROI barometer
when split out by scores given by respondents headquartered in these different places.
Location of respondents’ headquarters
Organisation type of respondents
Respondents’ average number of attendees to events
<50 attendees
12%
50-100
attendees
41%
100-500
attendees
37%
500+
attendees
10%
Asia
6%
North America
24%
Europe
20%
UK
43%
Other
7%
Location of respondents' headquarters
Respondents’ average number of
attendees to events
Location of respondents’ headquarters
Source: Volterra
Source: Volterra
Source: Volterra

Page | 36
UK based respondents rated generally in line with
average responses, although they rated Chicago in 4th
place above Singapore. European respondents
(excluding UK) ranked London above Paris by slightly
more than other respondents (3.5 points) and rated
Vienna in 5th
position above Chicago.
North American respondents ranked London and Paris
much more closely (only 0.7 points apart) and rated
Singapore in 3rd
position, followed by Chicago in 4th
which was rated narrowly ahead of Barcelona. Vienna
remained in 6th
position for North Americans.
Asian respondents ranked London as the best city, 9
points above Barcelona which was ranked closely with
Paris in 2nd
and 3rd
positions. Vienna was scored most
positively by Asian based respondents with Chicago and
Singapore scored lowest.
Spotlight on London
Respondents were overwhelmingly positive about the attributes that make London a very popular city for business events. The main
issues that were raised as negatives for the city were around expense, in terms of travel, accommodation and activities. However our
research did not entirely support this. The 2012 Global Corporate Travel Forecast and Hotel Negotiability Index (below) showed that
London is highly competitive in offering European Average Ticket Prices for Air Fares, but it performed slightly less well on Average Daily
Rates for Hotels. According to these indicators, London maintained its attractiveness to corporate travel, offering considerable
reduction (39%) on advance purchase savings for long-haul air fares. However, average daily rates for hotel bookings increased by 2%,
ranking relatively low among the European cities with competitive hotel negotiability.
40 50 60 70
Asia
North
America
European
(excl.UK)
UK
Overall
ROI Barometer by location of respondent
Vienna
Chicago
Singapore
Barcelona
Paris
London
Source: Volterra

Page | 37
London’s strengths across a variety of industries were identified
as important attributes in attracting business events to the city,
although some respondents questioned whether the city was
making the most of these attributes.
Source: Global Corporate Travel Forecast
and Hotel Negotiability Index (2012),
Egencia.
“London has become a leading global city
with strengths in arts, education, commerce,
finance, fashion, and media”
“London has world class financial institutions
and international markets”
“London has access to cutting-edge
technology”

Page | 38
London’s strengths and weaknesses
THE STRENGTHS
Multiple strengths were identified for London. Typically several respondents mentioned each strength listed below and the quotes are
simply representative of the positive responses we received.
• London is seen as an excellent centre for business and networking which adds to its attraction for hosting business events there.
• London is seen as a very welcoming and open city.
• The diversity of the city both in terms of level of budget and types of activity were seen as a huge positive for London.
“Many companies have a working relationship with London based businesses”
“London is a good centre for networking and completing other business”
“London appears friendlier than Paris”
“Multicultural”
“Very cosmopolitan”
“There is always something for everyone and for every budget!”

Page | 39
• As with the travel trade, the ability to combine business and pleasure is also seen as a huge benefit for the city.
• The lack of language barrier was mentioned by many respondents and is seen as a huge inherent advantage for the city over
other European destinations.
• Another natural benefit for the city that was repeatedly identified was its geographical location, which coupled with its
connectivity make it a very accessible city.
THE WEAKNESSES
More weaknesses were identified for business tourism than by the travel trade industry. In this section we summarise the main
weaknesses that we found evidence for and most quotes are representative of several comments made by respondents.
• Expense was identified as the largest deterrent from hosting events in London.
“London is well positioned to combine professional purpose with pleasure”
“Main differentiator is that communication is much easier because English is
a second language [for many attendees]”
“Probably the 'best' global hub for business and cultural events, halfway
between Asia and The Americas”
“The biggest problem with London is the high rates.”
“Airline cost and local transportation fees”

Page | 40
• Although the fact that London has leading experts across many fields was identified as a strength for the city, some respondents
also suggested that the city could make more of this by engaging with those experts and integrating them better into the
business event offer.
• Similar to travel trade, the difficulty for some visitors to obtain visas was identified as a weakness for the city.
• Whilst accessibility was identified as a huge strength of the city, the constraints of Heathrow were also identified as a
disadvantage and could be seen as a threat to continued future growth.
• Lack of availability of large conference centres was also raised by some respondents who focus on larger events.
“Has London really sought to engage its leading scientists and academics
and integrate the content offer?”
“The biggest challenge with… London is that it takes [so long] to get a visa to
the UK. Indian travellers therefore [have] to plan well in advance. On the
contrary, a visa to France, Spain, or Singapore can be got within a week”
“Heathrow is subscale, slow (due to security and transport) and needs to
have a plan for an early major upgrade and/or a major new London area
airport”
“For an event organiser the lack of large conference centres and large hotels
with large conference facilities [in London] compared to the other cities is not
as good”

Page | 41
• As with travel trade, the lack of packages available was seen as a deterrent for business tourism.
Insights and recommendations
London is a very popular city for business tourism. Organisers like the fact that the city offers more than just a business event and
attendees want to come to see everything else that the city also has to offer. However some negatives were repeatedly raised about
the city – most notably expense, potential future constraints on accessibility, and visa problems. London was rated particularly highly
by our Asian respondents which is a very positive finding for the future as the world economy continues to shift more to the emerging
economies. London was seen to possess many strengths that it perhaps does not make the most of – better engaging with its industry
experts and academics to create a more attractive business tourism offer, for example. The accommodation market was also not seen
to offer the most competitive packages. As the future becomes more competitive London must play to its strengths and ensure that it
continues to attract a large share of the business tourism market.
“If London and the hotels could have more attractive delegates’ packages I
think the numbers would rise”
“As the capital of the UK, London is an Alpha ++ city (along with New York), a
cultural epicentre and must-see European destination, the whole world in a
single metropolis. Our clients from Japan and mainland Asia rarely pass up the
chance to visit this most enchanting city during European sojourns”

Page | 42
In order to remain a competitive and top ranking city for business tourism London needs to:
• Remain competitive in terms of quality and availability of accommodation to suit all budgets and travellers
• Continue to be one of the most accessible locations to travellers from all across the globe, but especially growth economies. This
may require further investment in transport infrastructure that is already at full capacity (e.g. Heathrow for international travel
and continued reinvestment in the underground network for local travel)
• Continue to invest in its cultural, entertainment and restaurant offer and support its retail locations as these are factors that
attract attendees to come to events in London
• Consider offering more promotions to attract visitors
• In so far as it can have any influence upon visas, ensure that the city remains easy for tourists from all across the world to visit
• Consider the opportunity to better engage with industry experts and academics to use them as a means of attracting more
business tourism to the city
• The popularity of London with Asian respondents is a positive finding for future competitiveness of the city as the world
economy will continue to shift towards emerging markets and we would therefore expect a larger number of business events to
be coming from those parts of the world in the future. The city needs to ensure this popularity is retained.
Three of London’s popular conference and
convention venues: Olympia, Central Hall and
the British Museum

Page | 43
Why London? FDI
FDI
This section of the report looks at the different factors affecting FDI decisions, as well as the drivers of return on investment (ROI) in
different industries. It then compares London with other competitor cities in terms of the level of return that can be achieved.
The analysis in this section combines industry feedback, as obtained by interviews with senior management in selected companies in
each industry with quantitative analysis, in order to compare industry perception of return drivers and cities’ performance with a more
objective, albeit high level, measure of return.
The report focuses on five industries:
• Creative Industries
• Life Sciences
• Financial Services
• Business Services
• Technology
A panel of five cities was used to compare
current and future ROI for each industry, with
a representative city sought for each region.
Cities were selected based on discussions with industry leaders, as well as data on historic FDI flows (see figure above for historic FDI
data as captured by fDi Intelligence). As with Business Travel and Travel Trade, effort was made for consistency reasons to select the
same cities across the five industries. This was maintained with the exception of German cities which, given the disperse nature of its
business landscape it was decided to opt for different cities for each industry.
Using these criteria the selected cities for this research were:
• London, Singapore, Shanghai, and New York for all five industries
• Berlin for Creative Industries and Technology, Frankfurt for Financial Services, and Munich Business Services and Life Sciences
Capital Investment by industry, 2003 - 2011
Source: fDi Intelligence

Page | 44
Why London? FDI
Measuring Return on Investment
The first part of the analysis involved a number of interviews with industry leaders responsible for investment decisions in each industry
to understand what motivates their decisions to invest. Leaders were asked to describe the factors that are most important for their
business when choosing a city to invest and also to compare each competitor city on these factors.
The second part of the analysis involved a quantitative approach for measuring the return on investment by sector in each city.
Following an extensive literature review, and incorporating the responses of industry leaders, potential drivers of ROI were identified for
each sector. The most relevant of these drivers were then isolated using econometric analysis and their predictive relationship with ROI
identified. Due to the unavailability of historic ROI data for Creative Industries and the nature of the investment cycle in Life Sciences, a
benchmarking approach was used for these two industries, whereby key indicators of ROI were identified and evaluated using
weightings identified through interviews with industry leaders.
A forecast scenario for 2020 was then created and used to estimate how returns in each city could change in these industries given a set
of assumptions which are described in more detail in the Appendix.

Page | 45
Why London? Creative Industries
FDI | Creative Industries
Creative industries encompass the film and print media, advertising as well
as the design industry. The sector varies in the degree of its focus outside
its home markets, with exports often the first stage before FDI is
considered. In the United Kingdom and the United States, the film and TV
industries are heavily export oriented. For example, in the UK these
industries accounted for 4.3% of total UK services exports in 2010.
When choosing where to invest, companies will often select a country
where they want to be present and then decide on the city they want to
operate from.
The decision to invest
Most importantly companies have to go where the talent is. Human capital is a key factor in the
location strategy, in particular in media business, where success often depends on hiring the most
talented people and retaining those people. Our consultations with industry executives have revealed
the importance of locating in cities where the talent is located. In some sectors such as film and
television, there is little choice but to locate activities in certain cities where the key creative personnel
are based. This can often diminish the importance of city costs in the decision making process. The
attractiveness of a city as a place to live helps to retain top talent and is important as a pull factor
when re-locating executives.
The overall market size and market growth potential are also key factors in deciding on investment
location. However, it is not just the local market that is of interest, potential markets that can be
reached through a location are also taken into account. These will be influenced by cultural ties that an
investment location has with other markets, as well as language links.
A film crew
shoots a scene
from the film
London
Boulevard

Page | 46
Factors surrounding the local legal environment are
important in forming the location decision and
include:
• Ownership regulation - restrictions on foreign
ownership is a major barrier to investment in
some emerging economies. While market size and
growth may be attractive, companies may
encounter investment barriers such as equity caps
and joint venture obligations that deter them
from entering the market
• Intellectual property protection - the threat of
wide-spread infringement to intellectual property
rights can make a market far less attractive
• Rule of law – the overall reliability of the legal
system is also seen as important. Companies need
to know that if they enter into litigation with a
supplier or client, the legal system can be reliable.
In addition, concerns with high levels of
corruption may influence location decisions.
Other location factors include:
• Infrastructure - accessibility to transport hubs is viewed as important, given the international nature of the industry. This includes
the route availability and connectivity at airports, and travel time to and from the cities’ airports
• Taxation - personal tax rates were seen as a particularly important factor, given their impact on re-locating executives
A catwalk from
London Fashion
Week

Page | 47
• Costs - the degree to which costs are a factor in the location decision
process depends on the type of operation that is being set up. In some
areas, talent would usually pay for higher costs, with some cities having
more established creative industries irrespective of the costs of the city.
Our consultations with industry executives reveal that the high cost of
some locations are generally offset by higher productivity from a more
creative workforce. The creative industry has a unique skills
requirement which means that sometimes there is no choice but to
locate in a city where the most talented individuals are located. The
scope for relocating functions to lower cost locations may therefore be
more limited in this industry.
There are certain cities where multinational companies in the industry need
to be in, either as part of supporting their brand, or in order to maintain good
linkages to important clusters.
Cities comparison
China was viewed as a difficult market to enter in some of the areas, given issues around regulation and the barriers to local business
ownership. This made Shanghai a less attractive location beyond a representative office.
Hong Kong was seen as a more attractive location to Singapore by some of the companies in the sector, and a potential hub for Asian
operations.
Cities such as London and New York had the advantage of English language as their main language, which made it easier for
companies to communicate with their operations there, and easier to transfer people to those locations given the smoother transition
for expats.

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Maximising return on investment
The return on investment for creative industry companies will be influenced
by a number of factors discussed above. Lack of historical data to cover
return on investment for the industry meant that we were unable to perform
regression analysis to determine the drivers of return for this industry.
Instead, we used comparative metrics to look at how these factors vary
between different cities and, given the importance of each factor derived
from our desk research and industry interviews, how potential return on
investment could fluctuate between the cities. We then looked at how
performance could evolve in the future8
.
An important pool of talent, and favourable conditions to attract talent put
London at the lead among the selected cities that were benchmarked. New
York closely followed thanks to its large home market. The gap between the
two top cities and the remaining three is relatively large, with Singapore and
Shanghai closely together. Singapore benefits from a strong legal
environment but has a relatively small market that it addresses directly, while
costs in Shanghai are low but the legal environment is seen as lagging behind.
Berlin’s performance is somewhat better than the two Asian cities that we
analysed thanks to a strong legal environment and better human capital.
Looking at the future, we would expect to see London maintaining its lead by
2020 and the overall benchmark remaining unchanged with the exception of
Shanghai overtaking Singapore thanks to improvements in IP protection in
China (see table on next page for more detail).
8
See Appendix for a full discussion of our methodology.
Some of the
film crew from
the new James
Bond Feature
‘Skyfall’

Page | 49
Return on investment benchmark9
9
Higher score represents more attractive location, therefore higher score for human capital, market size and legal environment represent a better environment, while higher score for costs
represents lower costs.
Actual Weighting London New York Berlin Singapore Shanghai
Human capital 40% 100 87 62 56 51
Market size 30% 86 100 17 1 16
Legal environment 20% 93 86 93 100 57
Costs 10% 27 32 45 45 100
Current score 87 85 53 47 46
Rank 1 2 3 4 5
Future Scenario Weighting London New York Berlin Singapore Shanghai
Human capital 40% 100 85 62 56 51
Market size 30% 86 100 16 1 23
Legal environment 20% 93 86 93 100 72
Costs 10% 48 59 74 68 100
Future scenario score 89 87 56 49 52
Rank 1 2 3 5 4

Page | 12
Why London? Life Sciences
FDI | Life Sciences
The life sciences cover a wide variety of
areas, including sectors such as
pharmaceuticals and biotechnology. The
industry is relatively globalised, with key
activities ranging from research &
development (R&D) to manufacturing
and sales.
Source: European Commission
The R&D intensity in the
pharmaceuticals and biotechnology
sectors (as measured by R&D
expenditure as % of net sales) is the
highest of all industry groups, with
15.3% in 2010, as highlighted in the
figure below.
Geographical presence
In the US and Western Europe, a
significant proportion of investment is in
R&D related facilities, particularly within
pharmaceuticals and biotechnology. In
2010, the sector made R&D investments
of €37.7bn in the US and €27.8bn in
Europe10
.
Clinical trials represent the majority of
R&D expenditure. In 2012, 57.6% of R&D
expenditure in the US went towards
clinical trials with 24.8% spent on pre-
clinical research. The high cost of drug
trials in the West has led to a trend
towards increasing investment in clinical
research in developing countries.
North America and Europe remain the
largest pharmaceutical markets,
representing just over 41% and 26%
respectively of global pharmaceutical
sales in 2011 (see figure overleaf).
10
EFPIA, PhRMA

Page | 51
Why London? Life Science
Source: IMS Midas
When looking to invest, companies will
often first identify the country that they
would wish to invest in and then select
which city to locate in.
The key factors that are central to the
decision on investment location for life
sciences companies will vary significantly
depending on the type of activity they
are looking to locate.
Looking at R&D investment, the
following factors have been found to be
of particular importance when making
investment decisions:
• Quality and availability of human
capital - availability of qualified
staff is a key consideration for
R&D facilities. Top quality
universities attract the best
students who may continue to
reside and work in that city
• The potential for R&D
collaboration with research
institutions - the collaboration
between universities and
companies in the development of
new products is becoming
increasingly important
• Intellectual property protection - a
transparent and fair judicial
system, which respects intellectual
property rights, is a prerequisite
for many life sciences companies.
The nature of R&D activities
means the ability to protect
innovations from patent
infringements is often a key
consideration.
Another factor in location decisions for
life sciences companies is the location of
industry clusters, comprising in addition
to the concentration of research
institutions and qualified staff a range of
ancillary companies to service the
industry.
The market size and market growth
potential that can be accessed from an
investment location are two factors
relevant for certain activities in life
sciences. As a relatively global industry,
manufacturing of drugs can be done
from most places, while clinical trials are
increasingly also being carried out in a
wider spread of locations. However,
maintaining a presence in the largest
pharmaceutical markets is still seen as
essential. Despite the market potential
of Asia, the majority of pharmaceutical
sales are in the North American and
European markets, as depicted in the
chart to the left and the chart on the
next page.

Page | 52
Of particular importance in emerging markets, where individual national markets
tend to be smaller, is the selection of a location which will allow access to a large
set of neighbouring countries, providing a wide regional access to markets.
Market growth potential could be linked to high economic growth, demographics
or disease profile in each country, or to other factors such as improving trade
relations between the country and its neighbours.
Other factors influencing location decisions include:
Costs which can be an important consideration factor in deciding on a
geographical location, particularly for a manufacturing facility. The cost of clinical
Source: EFPIA, PhARMA
trials, as highlighted in the chart below left, can be significantly reduced by
locating stages of the trial in a lower cost location
Good transport facilities are essential, including proximity to efficient ports
facilities, when transportation of goods is an important part of the operations.
In addition, regulatory barriers to market access can often make it
essential to invest in certain facilities in order to gain access to that market. For
example, a manufacturing facility in a country can sometimes be a prerequisite for
getting regulatory approval or being able to market a product in that geography.
Source: Kinapse 2007, MISG Clinical Research Working Group

Page | 53
More generally, we found the following factors relevant to life sciences companies in common with other sectors:
• Political stability and positive attitude to foreign investment
• Ability to repatriate funds
• Taxes on profit repatriation
• Attractiveness for expat staff
Geographical comparison
The UK’s share of global patient recruitment in clinical trials dropped from 6% in 2000 to 2% in
2006, while the share of Latin America and SE Asia & W Pacific rose to 7% each from 3% and 2%
respectively in 200011
. North America retained the largest share of patient enrolment at 39% in
2006 compared to 14% for the EU, which represented a large drop from its 21% global share in
2000.
The UK has some of the largest life science clusters in the world and is a major location for pre-
clinical and clinical research, and manufacturing, as well as hosts the global headquarters of
several major pharmaceutical companies. However, in recent years the UK has suffered from
barriers to health research, with a recent review by the Academy of Medical Sciences finding that
UK health research activities are being undermined by an overly complex regulatory and
governance environment. It takes an average of 621 days from a decision to support studies
through to the first patient entering a trial in the UK, compared to Canada’s 30 to 60 day process12
.
Despite these recent difficulties, the UK and London remain excellent locations for Life Sciences
investment with some of the top universities in the world and a talented and productive workforce.
11
Commercial Clinical Research in the UK, Kinapse, November 2008
12
A New Pathway for the Regulation and Governance of Health Research, Academy of Medical Sciences, January 2011

Page | 54
Why London? Life ScienceWhy London?
London is seen as strong on human capital. It is easier to
transfer staff to London compared to other European
locations, and it has good supply of quality people with
science background. London also benefits from having
English as its main language, as well as from good
international transport links, and good professional services,
such as accountants and lawyers that can support the
industry.
Despite its small market size, Singapore has become a major
destination for life science investment in Asia. Singapore is
already strong in contract clinical research and
pharmaceutical manufacturing, as well as biotechnology, and
is now growing its pre-clinical pharmaceutical research
capabilities. The government has strongly supported this
effort and has funded the development of several purpose
built business parks which now house some of the major
pharmaceutical and contract research firms. To provide the relevant workforce for the industry, the Singaporean government has
invested heavily in universities and research institutions and promotes university/ industry collaboration.
The life science industry in China has seen exceptional growth in recent years. With a large and fast-growing market, China has
attracted capital investment of $11.6bn in the life science industry since 200313
, second only to the United States.
However, China remains an emerging market that has some catching up to do in terms of the quality of its academic institutions and
staff, as well as IP protection. China’s cost advantage has been reduced in recent years.
13
fDi Markets

Page | 55
Maximising return on objectives
We focus our benchmarking analysis on
R&D in life sciences. As investment in
R&D takes many years to produce a
revenue stream, which can then be
generated from different geographies, it
is not easy to assign a return to a single
location. An alternative way to measure
return is by analysing the ease by which
R&D objectives can be met. This can be
done by benchmarking the performance
of different cities in key factors affecting
the success of R&D operations.
We grouped these factors into three
categories:
• R&D environment;
• IP protection; and
• Market size.
Each factor was assigned a weight based
on our findings from the academic
literature and company interviews14
.
Among the cities we compared for this
study, our benchmarking analysis put
New York as the location with most
favourable factors for R&D investment,
followed by London (see table on next
page). Munich comes in third place
followed by Singapore and Shanghai. Our
analysis shows that London, Munich and
Singapore currently rank closely
together, with a strong R&D
environment in London being somewhat
offset by weaker IP protection and a
relatively smaller national market.
New York benefits from strong IP
protection, as well as direct access to the
largest market for life sciences in the
world, together with good access to
14
See Appendix for a full discussion of our methodology.
world-class research staff and overall
positive R&D environment.
Singapore is surpassed by Munich and
London as these locations have direct
access to larger domestic markets and
have higher levels of health expenditure
per capita.
Looking at how the picture could evolve
by 2020, we developed a future scenario
for the factors affecting R&D in life
sciences that incorporates the drive in
London, and the UK as a whole, to
nurture the life sciences industry. This
could see increased investment in
university research and greater
collaboration with industry, as well as
higher IP protection for the industry. This
will see the gap between New York and
London almost halve.

Page | 56
Continued rapid growth in health expenditure in China should see the market size for life sciences in Shanghai increase significantly
over the next decade which, together with a more favourable R&D environment and some improvements in IP protection, should
narrow the gap between Shanghai and Singapore.
Return on objectives benchmark
Current scenario Weighting New York London Munich Singapore Shanghai
R&D environment 70% 100 89 84 86 59
IP protection 10% 100 82 92 93 66
Market size 20% 100 19 26 9 18
Current score 100 74 73 72 51
Rank 1 2 3 4 5
Future scenario 2020 Weighting New York London Munich Singapore Shanghai
R&D environment 70% 100 100 85 88 77
IP protection 10% 100 98 92 93 82
Market size 20% 100 23 27 9 34
Future scenario score 100 85 74 73 69
Rank 1 2 3 4 5

Page | 57
Case Study
Shionogi
Shionogi is a Japanese pharmaceutical
company headquartered in Osaka. The
company, which had sales of £2,090m in
2011, has developed some well-known
drugs such as anti-cholesterol drug Crestor
(marketed by Astra Zeneca) and Doribax, a
broad spectrum antibiotic. Founded in
1878, Shionogi started as a drug wholesaler
in Osaka but quickly moved into developing
and producing its own pharmaceuticals,
veterinary drugs and agrochemicals. In
2000, the company made the decision to
concentrate its business entirely on
pharmaceutical development and
production by divesting of its animal health,
industrial chemicals and clinical testing
businesses. The company focuses its R&D
activities on three key therapeutic areas:
obesity/diabetes, viral infection and pain
relief.
Overseas expansion Shionogi opened
its first office abroad in 1935 in Taipei,
Taiwan. The company has since established
operations in New Jersey, Shanghai and
Hong Kong. As part of their first five year
business plan drawn up in 2000, the
company made the decision to expand into
Europe.
Journey so far Shionogi opened its
European headquarters in London in July
2012. The company has initially hired 15
people and has plans to rapidly increase its
staff in the next year. Focussing on R&D, it
manages outside agents and companies
from its London offices.
Why London? The company carried out
an extensive review of potential locations in
Europe and the UK for its European
headquarters. They eventually shortlisted
two cities; London and Zurich. The reasons
why Shionogi chose London include:
 Strength of medical research in the
UK
 Large pool of experienced and well-
trained research staff
 Excellent transport links to the rest
of the continent and the world
 Excellent business infrastructure
Shionogi is positive about the direction that
the UK government is taking in supporting
the industry. The move to London fits well
with the company’s strategy to develop an
early-phase research network and it intends
to set up collaboration agreements with
several top universities in the UK. A related
factor for locating in London was the
company’s decision to geographically
diversify its clinical trial activities. The
strategy of the company is to conduct
clinical trials more efficiently by selecting
the best location around the world based
on the trial phase and regulatory approval
requirements. The UK’s medical regulatory
system, which has high standards on safety
and quality was an attraction for the
company, since it is seen as leading the way
in terms of the direction of regulatory
standards in other countries.

Page | 58
Why London? Financial Services
FDI | Financial Services
The financial crisis of 2008 sent shockwaves through the financial
services sector and the industry is bracing itself for further troubles
and tighter regulatory supervision. Financial services FDI
represented 6% of global FDI investment by value in 2011. However,
this represented a 52% decrease compared to the pre-crisis
average, the biggest reduction of any industry15
.
Drivers of return on investment, as well as the reasons behind
investment decisions, vary between different areas of the financial
services industry given the diverse nature of businesses in this
sector. However, there are a number of themes that encompass the
majority of the sector:
• Market size – the number of potential clients that can be
reached from a new location is a crucial factor affecting
investment location decisions. For example, some companies
will look to follow their home clients and set up local presence
where they can serve them internationally, others will be looking
to tap into the growing number of middle and higher income
population in emerging economies
15
UNCTAD, World Investment report 2012

Page | 59
• Industry cluster – a few locations,
such as London and New York, are
seen as crucial centres where
companies are required to have
presence. Locating there also
benefits companies by being
surrounded by a critical mass that
facilitates the exchange of ideas and
provides a strong supply of auxiliary
services
• Regulatory environment – restrictions
limiting the scope of companies’
operations in a country, as well as the
overall level of regulatory burden are
important. Increasingly, however, it is
the level of uncertainty and lack of
stability in the regulatory
environment that are seen as
deterring investment most, in
particular when changes to
regulations could apply
retrospectively16
• Taxation – both corporate and
personal tax are important in making
investment decisions. Corporate tax
will have a direct impact on return
but personal tax is seen as
increasingly important through its
impact on companies’ ability to
attract and relocate talented staff
• Human capital – the availability of
talented and productive staff, either
that can be hired locally or brought as
expats is important. The importance
of high quality human capital is
extended beyond the company’s
operations and covers staff at
support services such as lawyers,
16
Ipsos MORI, May 2011
accountants and consultants that are
required for the smooth operation of
the business. Certain factors are seen
as important in attracting staff to a
location, such as personal tax and
opportunities presented by a global
financial cluster. Others include
immigration restrictions, and the
administrative burden associated
with dealing with the immigration
authorities, as well as the quality of
life a location can offer
• Costs – operating costs, such as staff
wages and office rental costs, appear
to have less influence on location
decisions but can still make an
important impact on the overall
return on investment.

Page | 59
Cities comparison
London was cited as the most global city, partially thanks to its location, which
allows it to bridge between the US and Asia, but also thanks to its outward
outlook. London’s strength as a major cluster in financial services is also an
important factor in its success, with the multicultural nature of London
attracting foreign talent to the city.
New York was also seen as a major global cluster in finance and as a culturally
diverse city, although where business is much more focused on its home
market.
Singapore benefits from proximity to the fast growing Asian market, as well as
low taxation, low regulatory burden and good infrastructure. It is seen by some
industry participants as the strongest candidate to challenge London’s
international dominance in financial services. However, Chinese markets are
increasingly serviced from Shanghai and Beijing.
London was seen as the only significant financial centre in Europe, with
Frankfurt’s language barriers and more limited cultural offering making it a
much less attractive location than London.
Maximising return on investment
As part of our quantitative analysis, we looked at the potential drivers or
predictors of return on investment in the financial services using econometric

Page | 61
modelling, which identified the relationship between historic return on investment and key variables.
Our analysis found the following variables good at predicting return on investment in the financial services sector:
• size of the equity market;
• wage costs;
• office rental costs; and
• tax.
The econometric analysis shows that a larger equity market will have a positive effect on return on investment, while higher wages,
rental costs and tax have significant negative effects on return on investment in the financial services sector, with wage costs having
the largest negative impact followed by taxation and office rental costs. The econometric model was then used to estimate returns in
five cities by 2020 based on a forecast scenario, and compared those to actual returns observed in 201017
. Remnants of the financial
crisis were still putting some downward pressure on returns in both New York and London in 2010. Looking forwards, a relatively
subdued economic environment is expected to see lower returns in many financial centres in 2020. London should benefit from its
geographical position, which will allow it to benefit from a recovering US market and a rising Asian deal flow, while maintaining
relatively modest increases to its cost base. A weaker Eurozone is likely to negatively impact Frankfurt through lower deal flow and
potentially higher fiscal pressures, while higher wages are expected to dampen down return in Singapore (see table below).
Return on investment %
17
Observed ROI values for 2010 were used rather than an average of a number of recent years as used in the Business Services and Technology sections, as ROI trend is expected to have
changed significantly post the financial crisis in 2008 – 2009.
Singapore Frankfurt London Shanghai New York
As observed in 2010 9.4 9.0 6.1 0.3 0.2
Future scenario 2020 3.8 3.3 3.9 2.8 3.5

Page | 62
Why London? Financial ServicesWhy London?
Case Study
Banco do Brasil
Headquartered in Brasilia, Banco do Brasil is Latin America’s largest bank with assets of more than US$519bn as at 31 December 2011, and the largest
Brazilian bank in the retail market. Banco do Brasil was founded in 1808 and has played many key roles in Brazil’s financial history, including, until 1964, the
issuing of the country’s currency. The Bank remains majority owned by the federal government, which has a 51.78% equity share.
Overseas expansion The Bank set up its first international branch in Paraguay in 1941, expanding rapidly outside Brazil with branches in the major global
financial centres by the end of the 1970s. The Bank has since consolidated its international presence and now has 49 units in 24 countries. In recent years, the
existence of large Brazilian communities in many different countries, internationalisation of Brazilian companies, and leverage of Brazil’s foreign trade, has
increased the importance for Banco do Brasil to expand globally, in order to fulfil the Bank’s mission to support the country’s development, its corporate
sector and Brazilian nationals living abroad. This increasing focus on foreign expansion has seen the contribution of international operations to the group rise
substantially, representing 7% of the Bank’s total revenues by the end of the first half of 2012. Each international office location is centred around a business
strategy tailored to suit the business climate in that location, with operations in each country varying depending on the opportunities there.
Journey so far Banco do Brasil has had operations in London since 1971. It currently has approximately 50 employees and is the second largest foreign
branch of Banco do Brasil in assets terms. Its London operations focus on commercial loans for clients in a variety of international locations, including Brazil,
Europe, Middle East and Africa. Banco do Brasil has navigated the financial crisis cautiously and has seen new opportunities in the commercial loans market in
London in its aftermath, with its portfolio of loans growing substantially in the past 3 years.
Why London? London remains a crucial component in the international operations’ strategy of the Bank. Some of the key benefits that a London location
provides include: global access to revenue opportunities - the London office has access to opportunities across all continents; and strong provision of business
services – the London office can count on high calibre lawyers, accountants, and consultants for support.
Brazil has close relations with the United States and United Kingdom and therefore English is a second language for many Brazilians. This gives London an
advantage over other major European cities when it comes to choosing a city to engage in business. Falling spreads in the Brazilian domestic market have
driven the Bank to focus on maximum efficiency throughout its operations. This emphasis has been present in the London office, which remains vigilant on all
aspects of costs in its operations. However, operating in London means competing with investment banks for the top talent and this can be expensive. Wage
costs are significantly higher in London than would be the case for a comparable operation in Brazil, although this is largely compensated for by the high level
of skills available in the London market.

Page | 63
Why London? Business Services
FDI | Business Services
Business services form an important sector for many global cities. However, the
diversity of businesses in this area often makes it less prominent in cities’ focus. Some
professional services, such as accountancy and law, can find it harder to expand
overseas given the need to understand the local laws and accounting standards (and
often have locally recognised professional qualifications). Other businesses, such as
marketing, rely on deep understanding of local tastes and tend to operate best at a
local level. Nevertheless, business service companies are becoming increasingly more
global, with growth strategies involving more than in many other industries a
horizontal approach, where the same activity is being carried out in each location.
There is significant variation in the importance of drivers of return on investment in the
business services industry as well as the reasons why companies invest, with the
following factors relevant however for the majority of the industry:
• Market size – For most business services, market size is judged by the volume of
business that can be accessed from a given location, which is often a function of the
number of companies in that market and their propensity to spend on the related
services. Given the diversity in the industry, the importance of having an office in
the same city location as a client varies between areas. However, across all areas
what is important is the ability to access clients and this accessibility defines the
market size

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